What is the primary objective of monetary policy?

To regulate government expenditures

How does quantitative easing affect the money supply?

It decreases the money supply by selling government bonds.

It increases the money supply by purchasing government bonds.

It has no effect on the money supply.

It stabilizes the currency exchange rates.

How does a central bank implement contractionary monetary policy to control inflation?

By increasing Quantitative Easing (QE)

What effect does lowering interest rates have on borrowing and spending?

It reduces borrowing and increases saving.

It increases borrowing and reduces saving.

It has no effect on borrowing and saving.

It stabilizes the stock market.

Why does monetary policy have time lags in its impact on the economy?

Due to delays in implementing policy decisions

Because firms and consumers react immediately to policy changes

Because interest rates directly affect inflation rates

Because monetary policy does not affect economic growth

What is a potential drawback of lowering interest rates to stimulate economic growth?

Increased government expenditures

How does quantitative easing affect investors and their funds?

It reduces investor confidence in the economy.

It stabilizes the stock market.

It allows investors to retrieve their funds for spending.

It increases taxes on investments.

Why is the independence of a central bank considered advantageous for effective monetary policy?

It prevents inflation from occurring.

It allows the central bank to focus on long-term economic goals.

It reduces government expenditures.

It stabilizes the currency exchange rates.

Monetary Policy Free MCQ Practice Test with Solutions

	Economics for GCSE/IGCSE 71 videos\|82 docs\|39 tests

	Economics for GCSE/IGCSE 71 videos\|82 docs\|39 tests

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